<PAGE>
================================================================================

                                   FORM 10-Q
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                       __________________________________


[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

    For the quarter ended March 31, 2001

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

    For the transition period from_____________________to_________________

    Commission file number 1-10877

                         TERRA NITROGEN COMPANY, L.P.
            (Exact name of registrant as specified in its charter)

           Delaware                                 73-1389684
(State or other jurisdiction of        (I.R.S. Employer Identification No.)
 incorporation or organization)

           Terra Centre
    PO Box 6000, 600 Fourth Street
          Sioux City, Iowa                           51102-6000
(Address of principal executive office)              (Zip Code)


                        Registrant's telephone number:
                                (712) 277-1340

  At the close of business on April 30, 2001, there were 18,501,576 Common Units
  outstanding.

  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
 X Yes   ___ No
---

================================================================================
<PAGE>

                         PART I. FINANCIAL INFORMATION

                          TERRA NITROGEN COMPANY, L.P.
                          CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
                                  (unaudited)
<TABLE>
<CAPTION>
                                                  March 31,  December 31,  March 31,
                                                    2001         2000        2000
                                                  --------   ------------  ---------
<S>                                               <C>        <C>           <C>
ASSETS
  Current assets:
     Cash and cash equivalents                     $     10      $ 17,941   $  5,859
     Accounts receivable                             27,901        24,739     31,464
     Inventory - finished products                   49,525         9,431     25,095
     Inventory - materials and supplies               9,737         9,950     12,915
     Prepaid expenses and other current assets        3,038         3,117      1,179
------------------------------------------------------------------------------------
  Total current assets                               90,211        65,178     76,512

  Net property, plant and equipment                 145,549       147,597    154,125
  Other assets                                        9,115        11,259     12,366
------------------------------------------------------------------------------------
Total assets                                       $244,875      $224,034   $243,003
====================================================================================
LIABILITIES AND PARTNERS' CAPITAL
  Current liabilities:
     Short-term note payable to affiliates         $  1,387      $    ---   $ 19,229
     Accounts payable and accrued liabilities        24,707        19,680     19,536
     Customer prepayments                            20,060         3,076     23,339
     Current portion of long-term debt and
      capital lease obligations                       1,000         1,000        637
------------------------------------------------------------------------------------
  Total current liabilities                          47,154        23,756     62,741

  Long-term debt                                      7,481         8,250        ---
  Long-term payable to affiliates                     5,316         5,316      5,316
  Partners' capital                                 184,924       186,712    174,946
------------------------------------------------------------------------------------
Total liabilities and partners' capital            $244,875      $224,034   $243,003
====================================================================================
</TABLE>
See Accompanying Notes to the Consolidated Financial Statements.a

                                                                               2
<PAGE>

                          TERRA NITROGEN COMPANY, L.P.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per unit amounts)
                                  (unaudited)
<TABLE>
<CAPTION>
                                 Three Months Ended
                                      March 31,
                                   2001      2000
                                 -------   -------
<S>                              <C>       <C>
Revenues                         $59,899   $69,716
Other income                          90       169
--------------------------------------------------
Total revenues                    59,989    69,885
Cost of goods sold                56,233    62,580
--------------------------------------------------

Gross profit                       3,756     7,305
Operating expenses                 2,098     2,378
--------------------------------------------------

Operating income                   1,658     4,927

Interest expense                    (222)     (640)
Interest income                      162         1
--------------------------------------------------

Net income                       $ 1,598   $ 4,288
==================================================

Net income allocable to
   limited partners' interest    $ 1,566   $ 4,202
==================================================

Net income per limited
   partnership unit              $   .08   $   .23
==================================================
</TABLE>



See Accompanying notes to the Consolidated Financial Statements.

                                                              3
<PAGE>

                          TERRA NITROGEN COMPANY, L.P.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                  (unaudited)
<TABLE>
<CAPTION>

                                                        Three Months Ended
                                                              March 31,
<S>                                                     <C>        <C>
                                                          2001        2000
                                                        --------    --------
Operating activities:

  Net income from operations                            $  1,598    $  4,288
  Adjustments to reconcile net income to net cash
   flows from operating activities:
     Depreciation and amortization                         3,180       3,201
     Changes in operating assets and liabilities:
       Receivables                                        (3,162)     (1,620)
       Inventories                                       (39,881)      1,102
       Prepaid expenses                                       78         405
       Accounts payable, accrued liabilities and
         customer prepayments                             22,011      16,871
     Change in other assets                                2,144       2,259
----------------------------------------------------------------------------

Net cash flows from operating activities                 (14,032)     26,506

Net cash flows from investing activities:

  Capital expenditures                                    (1,131)        (79)

Financing activities:

  Net changes in short-term borrowings                     1,387     (20,371)
  Issuance (repayment) of long-term debt
   and capital lease obligations                            (769)       (210)
  Partnership distributions paid                          (4,152)        ---
  Other                                                      766         ---
----------------------------------------------------------------------------
Net cash flows from financing activities                  (2,768)    (20,581)
----------------------------------------------------------------------------

Net increase (decrease) in cash and cash equivalents     (17,931)      5,846
Cash and cash equivalents at beginning of period          17,941          13
----------------------------------------------------------------------------
Cash and cash equivalents at end of period              $     10    $  5,859
============================================================================
</TABLE>
See Accompanying Notes to the Consolidated Financial Statements.

                                                                               4
<PAGE>

                          TERRA NITROGEN COMPANY, L.P.
                  CONSOLIDATED STATEMENTS OF PARTNER'S CAPITAL


<TABLE>
<CAPTION>
                                                                          Accumulated
                                               Limited      General          Other          Total
                                              Partners'    Partners'     Comprehensive    Partners'
(in thousands, except for Units)              Interests    Interests        Income         Capital
---------------------------------------------------------------------------------------------------
<S>                                           <C>          <C>           <C>              <C>
Partners' capital at January 1, 2001          $196,571     $ (9,859)                       $186,712
Net Income                                       1,566           32                           1,598
Distributions                                   (4,070)         (82)                         (4,152)
Cumulative effect of change in accounting
  for derivative financial investments                                       14,200
Change in fair value of Derivatives                                         (13,434)
                                                                            -------
Comprehensive income                                                            766            766
---------------------------------------------------------------------------------------------------

Partners' capital at March 31, 2001           $194,067     $ (9,909)        $   766        $184,924
===================================================================================================

Limited partner units issued and
 Outstanding at March 31, 2001                              18,501,576
                                                            ==========

                                                                          Accumulated
                                               Limited      General          Other         Total
                                              Partners'    Partners'     Comprehensive    Partners'
(in thousands, except for Units)              Interests    Interests        Income         Capital
---------------------------------------------------------------------------------------------------
Partners' capital at January 1, 2000          $180,838     $(10,180)        $   ---        $170,658
Net Income                                       4,202           86             ---           4,288
---------------------------------------------------------------------------------------------------

Partners' capital at March 31, 2000           $185,040     $(10,094)        $   ---        $174,946
===================================================================================================

Limited partner units issued and
 Outstanding at March 31, 2000                              18,501,576
                                                            ==========
</TABLE>

See Accompanying Notes to the Consolidated Financial Statements.

                                                                               5
<PAGE>

                          TERRA NITROGEN COMPANY, L.P.

             Notes to Consolidated Financial Statements (Unaudited)


1. Basis of Presentation

   The consolidated financial statements contained herein should be read in
   conjunction with the consolidated financial statements and notes thereto
   contained in the Terra Nitrogen Company, L.P. ("TNCLP") Annual Report on
   Form 10-K for the year ended December 31, 2000. TNCLP and its operating
   partnership subsidiary, Terra Nitrogen, Limited Partnership (the "Operating
   Partnership"), are referred to herein, collectively, as the "Partnership".

   The accompanying unaudited consolidated financial statements reflect all
   adjustments, which are, in the opinion of management, necessary for the fair
   statement of the results for the periods presented. All of these adjustments
   are of a normal and recurring nature. Results for the quarter are not
   necessarily indicative of future financial results of the Partnership.

   Net income per limited partnership unit is computed by dividing net income,
   less a 2% share allocable to the General Partner for the three months ended
   March 31, 2001 and 2000, respectively, by 18,501,576 limited partner units.
   According to the Agreement of Limited Partnership of TNCLP, net income is
   allocated to the General Partner and the Limited Partners in each taxable
   year in the same proportion as Available Cash for such taxable year was
   distributed to the General Partner and the Limited Partners. If there is no
   cash distribution, net income is allocated to the Limited Partners and the
   General Partner generally based on their respective ownership percentages.
   Distributions of Available Cash are made 98% to the Limited Partners and 2%
   to the General Partner, except that the General Partner is entitled, as an
   incentive, to larger percentage interests (up to 50%) to the extent that
   distributions of Available Cash exceed specified amounts.

2. Distributions to Unitholders

   The Partnership makes quarterly cash distributions to Unitholders and the
   General Partner in an amount equal to 100% of its Available Cash. No
   distributions were made in 2000. The Partnership announced a cash
   distribution of $4.2 million ($0.22 per common unit) which was paid in
   February, 2001.

3. Financing Arrangements

   The Partnership has an arrangement for demand deposits and notes with an
   affiliate to allow for excess Partnership cash to be deposited with or funds
   to be borrowed from Terra Capital, Inc., the parent of the General Partner.
   At March 31, 2001 and 2000, no amounts were deposited with Terra Capital,
   Inc. The amount of the demand notes was $1.4 and $19.2 million at March 31,
   2001 and March 31, 2000, respectively, and bore interest at the rate paid by
   Terra Capital on its short-term borrowings.

                                                                               6
<PAGE>

4. Natural gas costs

   Natural gas is the principal raw material used in the Partnership's
   production of nitrogen products. The Partnership enters into forward pricing
   arrangements for natural gas provided that such arrangements would not result
   in costs that would be greater than expected selling prices for nitrogen
   products. Under those conditions, the Partnership's natural gas procurement
   policy is to effectively fix or cap the price of between 25% and 80% of its
   natural gas requirements for a one-year period and up to 50% of its natural
   gas requirements for the subsequent two-year period through supply contacts,
   financial derivatives and other forward pricing techniques. Variances from
   this policy are reviewed with the General Partner. The financial derivatives
   are traded in months forward and settlement dates are scheduled to coincide
   with gas purchases during that future period. These contracts reference
   physical natural gas prices or appropriate NYMEX futures contract prices.
   Contract physical prices are frequently based on the Henry Hub Louisiana
   price, but natural gas supplies for the Partnership's production facilities
   are physically purchased from various suppliers which often creates a
   location basis differential between the contract price and the physical price
   of natural gas. Accordingly, the use of financial derivatives may not exactly
   offset the change in the price of physical gas.

   The Partnership has entered into forward pricing positions for a portion of
   its natural gas requirements for the remainder of 2001 and part of 2002,
   consistent with its policy. As a result of its policies, the Partnership has
   reduced the potential adverse financial impact of natural gas price increases
   during the forward pricing period, but conversely, if natural gas prices were
   to fall, the Partnership will incur higher costs. Contracts were in place at
   March 31, 2001 to cover approximately 14% of natural gas requirements for the
   succeeding twelve months. Unrealized losses from forward pricing positions
   totaled $.3 million as of March 31, 2001. The ultimate amount recognized by
   the Partnership will be dependent on prices in effect at the time of
   settlement for unrealized positions at March 31, 2001. The Partnership also
   had $1.1 million of realized gains on closed contracts relating to future
   periods that have been deferred to the respective period.

5. Idled facilities

   On November 30, 2000, the Partnership reported that it would not restart its
   Blytheville, Arkansas ammonia and urea production facility as the result of
   high natural gas costs. On January 2, 2001 the Partnership announced it would
   idle one of two sets of ammonia and upgrading plants at its Verdigris,
   Oklahoma facility as the result of high natural gas costs. The Verdigris
   plant resumed production on January 23, 2001 and the Blytheville plant
   resumed production in March, 2001.

6. Change in Accounting for Derivative Financial Instruments

   Statement of Financial Accounting Standards (SFAS) 133, "Accounting for
   Derivative Instruments and Hedging Activities" requires that all derivative
   instruments be recorded in the balance sheet at fair value. Changes in the
   fair value of derivatives are recorded in earnings or other comprehensive
   income, based on whether the instrument is designated as part of a hedge
   transaction and, if so, the type of hedge transaction. On January 1, 2001,
   the Partnership adopted SFAS 133 which resulted in a $9.9 million increase to
   current assets to recognize the value of open natural gas contracts, a $4.3
   million reduction to current liabilities to reclassify deferred gains on
   closed contracts relating to

                                                                               7
<PAGE>

   future periods and a $14.2 million increase to Partners' equity as
   accumulated other comprehensive income. Management does not expect the
   adoption of SFAS 133 to have a material impact on the Partnership's results
   of operations or cash flow.

                                                                               8
<PAGE>

        Management's Discussion and Analysis of Financial Condition and
                             Results of Operations

                             RESULTS OF OPERATIONS

                Three months ended March 31, 2001 compared with
                       three months ended March 31, 2000


Volumes and prices for the three-month periods ended March 31, 2001 and 2000
follow:

<TABLE>
<CAPTION>
                      2001                          2000
             Volumes       Unit Price      Volumes       Unit Price
            (000 tons)      ($/ton)       (000 tons)      ($/ton)
            ----------     ----------     ----------     ----------
<S>         <C>            <C>            <C>            <C>
Ammonia         19            $314           128            $132
UAN            354             132           601              62
Urea            36             207           128             121
</TABLE>

Revenues for the quarter ended March 31, 2001 decreased $9.8 million, or 14%,
compared with the same quarter in 2000. Lower sales volumes as the result of wet
field conditions that delayed field application of fertilizers sold by the
Partnership reduced first quarter 2001 revenues by $40.8 million from last year.
Significantly higher prices for all products, however, offset $31.1 million of
the revenue decline. The higher prices reflected lower industry inventories as a
result of periodic production curtailments by most nitrogen producers in
response to the past winter's very high natural gas costs.

First quarter gross profits decreased $3.5 million from 2000. Higher sales
prices increased gross profits by $31.1 million. These increases were more than
offset, however, by higher natural gas costs, which increased from $2.52/MMBtu
in 2000 to $6.51/MMBtu in 2001 (net of $2.1 million in forward pricing gains)
and lower sales volumes.

Operating expenses were $.3 million lower in 2001 than in 2000 primarily as the
result of reduced General Partner charges for computer expenses and employee
compensation. Net interest expense of $60,000 was $579,000 less than the 2000
first quarter due to lower borrowing levels.

Capital resources and liquidity

Net cash flows used in operations in the first three months of 2001 totaled
$14.0 million with $18.8 million used to increase working capital balances and
$4.8 million of operating income after non-cash charges. Most of the working
capital increases during the 2001 first quarter are related to seasonal changes
in inventory balances.

                                                                               9
<PAGE>

The Partnership's principal needs for funds are for support of its working
capital and capital expenditures. The Partnership intends to fund its needs
primarily through net cash flows from operating activities, and, to the extent
required, from funds borrowed from others, including borrowings from Terra
Capital, Inc., the parent of the General Partner. The Partnership believes that
such sources of funds will be adequate to meet the Partnership's working capital
needs and fund the Partnership's capital expenditures for at least the next 12
months.

Quarterly distributions to the Partners of TNCLP are based on Available Cash for
the quarter as defined in the Agreement of Limited Partnership of TNCLP.
Available Cash is defined generally as all cash receipts less all cash
disbursements, adjusted for changes in certain reserves established as the
General Partner determines in its reasonable discretion to be necessary. In
consideration of the Partnership's working capital and operating cash needs at
March 31, 2001, the General Partner determined Available Cash to be $4.2
million, which will be distributed during May, 2001.

Capital expenditures

Capital expenditures totaled $1.1 million for the first three months of 2001.
For the remainder of 2001, the Partnership plans to spend less than $5 million
for routine equipment replacement.

Limited Call Right

If at any time less than 25% of the issued and outstanding units are held by
non-affiliates of the General Partner, the Partnership, at the General Partner's
sole discretion, may call or assign to the General Partner or its affiliates its
right to acquire, all such outstanding units held by non-affiliated persons. The
General Partner and its affiliates owned 75.1% of the Common Units at April 30,
2001. If the General Partner elects to acquire all outstanding units, TNCLP is
required to give at least 30 but not more that 60 days notice of its decision to
purchase the outstanding units. The purchase price per unit will be the greater
of (1) the average of the previous twenty trading days' closing prices as of the
date five days before the purchase is announced or (2) the highest price by the
General Partner or any of its affiliates for any unit within 90 days preceding
the date the purchase is announced.

FORWARD LOOKING PRECAUTIONS
---------------------------

Information contained in this report, other than historical information, may be
considered forward looking. Forward looking information reflects Management's
current views of future events and financial performance that involve a number
of risks and uncertainties. The factors that could cause actual results to
differ materially include, but are not limited to the following: Changes in the
financial markets, general economic conditions within the agricultural industry,
competitive factors and price changes (principally, sales prices of nitrogen
products and natural gas costs), changes in product mix, changes in the
seasonality of demand patterns, changes in weather conditions, changes in
agricultural regulations, and other risks detailed in the Partnership's
Securities and Exchange Commission filings, in particular the "Factors that
Affect Operating Results" section of its most recent Form 10-K.

                                                                              10
<PAGE>

                          Part II.  Other Information


Item 6.  Exhibits and Reports on Form 8-K

     (a)  Exhibits:

          None


     (b)  Reports on Form 8-K:

          None



                                   SIGNATURE


     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                         TERRA NITROGEN COMPANY, L.P.

                                     By: TERRA NITROGEN CORPORATION
                                         as General Partner


                                     By: /s/ Francis G. Meyer
                                         --------------------------------------
                                         Francis G. Meyer
                                         Vice President
                                         (Principal Accounting Officer)



Date:  April 30, 2001